As the Antiplanner noted yesterday, the Washington Post has observed that unaffordable housing markets tend to be in liberal metropolitan areas while conservative metropolitan areas tend to be affordable. This is based on a comparison by Trulia economist Jed Kolko of housing prices (in dollars per square foot) vs. voting for Obama or Romney in the 2012 election.
Note that not all liberal metropolitan areas are expensive while not all inexpensive markets are conservative. But nearly all expensive markets are liberal and nearly all conservative markets are inexpensive. (The one exception, Orange County, California, is partly land-locked by other, more liberal communities.)
New Zealand economist Mish Shedlock asks if this is merely a correlation or does one factor cause the other? His weak conclusion is that “Union work rules, land availability, and building restrictions (or lack thereof) are all likely in play.” In fact, there is plenty of land available in all of the expensive regions; it is just rendered off limits to development by state or local land-use rules.
Beyond this, the Antiplanner suggests that the causal relationship goes in both directions. Liberals are more likely to want to regulate land. But liberals are also more likely to want to live in areas that have heavily regulated land. Thus, California and Oregon weren’t particularly Blue when they first passed land-use laws in the 1960s and 1970s. Ronald Reagan was governor of California when the state passed the California Environmental Quality Act (which put major roadblocks in the way of land development) and when most coastal counties drew their urban-growth boundaries. Republican Tom McCall was governor of Oregon when the state passed its notable land-use law in 1973.
While presidential and gubernatorial elections could swing either way in the California and Oregon of the 1960s through 1980s, today Democrats seem to have firm control of both states. Republicans have almost no say in California state politics, and polls show that Oregon’s incumbent governor is ahead in the polls for Tuesday’s election despite having suffered several major scandals in the past few weeks alone (not to mention the state’s $200 million dysfunctional Obamacare web site, the $190 million wasted on the Columbia River Crossing, and previous failed projects overseen by the governor).
If Democrats are attracted to highly regulated areas, many Republicans are repelled by them. The growth of such regulation in a limited number of states may be one reason why the nation has seen such a strong polarization of “red” and “blue” regions in the past couple of decades.
The Antiplanner would have less of a problem with such regulation if it applied only to liberals. Unfortunately, they want to use the power of the federal government to see it applied to everyone. This proved to be a disaster in Australia, Great Britain, and New Zealand (which is one reason why New Zealand economist Shedlock is so interested in U.S. housing).
Another analysis by Kolko found that the “lost generation” of homeowners (or, rather, people who don’t own homes) isn’t Millennials but the 35- to 54-year-old age class. Many people in this group first bought homes in the boom of the late 1990s and early 2000s, and then lost them to foreclosure in the late 2000s. Unlike most Millennials, many people now in their 50s may not have the opportunity to buy another home in their lifetimes.
What Kolko and Shedlock didn’t mention is that the same land-use restrictions that make housing expensive in some metropolitan areas also make housing prices more volatile. This increases the number of people who will lose their homes during economic downturns. People who bought homes before 1995 were less likely to be underwater after the 2008 financial crisis, and so were less likely to lose their homes.
Some people have accused Millennials of being “cheap” because they haven’t embraced homeownership. In fact, their rate of homeownership isn’t significantly lower than that of previous generations at their age. But they certainly have a good reason to be wary of buying homes in regions where volatility is high. Thus, planners whose policies discourage single-family homeownership (and thus make prices volatile) because, they think, Millennials won’t want to buy homes are creating a self-fulfilling prophecy.